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SURVEY: Argentina's December Industrial Output Seen Up 2.8%

Industrial Production (Year-On-Year):
              Dec    Nov    Oct    Sep   Dec10   FY/2010
Forecast:    +2.8%  +3.7%  +5.2%  +5.4%  +8.3%     -
Actual:        -    +3.5%  +4.5%  +5.0%  +10%    +9.7%

    By Taos Turner
    OF DOW JONES NEWSWIRES

BUENOS AIRES -(Dow Jones)- Argentine industrial production probably slowed last month as weaker demand from Brazil appeared to affect output of cars and other goods.

The government will likely report that industrial output rose 2.8% on the year last month, according to the median forecast of seven economists surveyed by Dow Jones Newswires.

The national statistics agency, Indec, is slated to release it monthly manufacturing report Tuesday at 2 p.m. EST.

But one respected consulting firm that closely follows industrial production estimated output actually fell in December from the same month a year ago.

Orlando J. Ferreres & Asociados, or OJF, said in a report that output declined 1.3% in December.

A contraction in industrial output in Brazil affected local production, pushing Argentine output down for the first time since November 2009, OJF said.

"Accordingly, given that the automotive sector is starting to stall, to maintain this expansive trend it will be necessary to spur growth in other sectors," OJF said.

Brazil is Argentina's top trade partner so its economic activity almost always has a major influence on Argentina, even if the effects of this can take months to show up.

Auto production is a key component to industrial output and is easily Argentina's largest manufacturing sector.

The data from last month indicate a slowdown. December vehicle output totaled 52,412 units, according to the auto makers' association, Adefa. That's down almost 21% from the previous year and almost 31% from November.

Adefa said the December decline was due to seasonal factors and the suspension of work at four factories, which were closed for up to two weeks for maintenance.

But December vehicle exports totaled 35,583 units, down 13% on the month and 11.4% on the year, pointing to lower demand, particularly from Brazil.

Local manufacturers had been benefiting from a booming domestic economy and Brazilian strong demand for Argentine automobiles and petrochemicals.

But manufacturers face a more challenging environment in 2012, with private sector forecasters expecting the economy to expand at less than half of this year's pace.

On top of expectations that demand from Brazil may be less robust this year, trade tensions are growing as Argentina seeks to crack down on imports to protect its trade surplus.

Argentina's trade deficit with Brazil rose almost 24% last year to about $4.2 billion last year.

"Argentina has been a permanent problem. We have good political relations, but economically it is difficult to deal with them," Fernando Pimentel, Brazil's minister of development, industry and foreign trade said last week.

Brazilian officials are upset with Argentine trade barriers, which Argentina has been erecting right and left in a bid to protect its global trade surplus.

Meanwhile, economists say annual inflation thought to surpass 20%, as well as demands for higher wages, will pressure local manufacturers in 2012, making them less competitive compared with counterparts in other countries.

-By Taos Turner, Dow Jones Newswires; 54-11-4103-6738; taos.turner@ dowjones.com

  (END) Dow Jones Newswires
  01-23-121722ET
  Copyright (c) 2012 Dow Jones & Company, Inc.